Lenders and Franchise Brands

By Rick Ormsby
Managing Director
502-252-6422
[email protected]

Financing or refinancing a franchise loan is a very important and time-consuming process. By my last count, I have connections with almost 150 franchise lenders of various kinds. There are so many options!

What does this mean for a franchisee? If you have a brand that has performed well, it likely means that you will have bunches of competition for your loans in this market. That is good news.

The bad news is that the administration, due diligence and on going servicing of these loans is at levels I have never seen. If you have several loans, you almost need a full-time CFO.

Getting a loan seems simple enough. But, like standing in line at Blaze Pizza, there are so many options that it is oftentimes overwhelming.

Typically, lenders classify brands in Tier 1, Tier 2 or Tier 3. Tier 1 brands include many of the more familiar QSR brands with high unit counts: Burger King, Wendy’s, Taco Bell, Dunkin Donuts, Panera and Popeye’s, as examples. These brands are often seeing rabid competition in the banking community, so rates and terms are generally very favorable right now.

Tier 2 might incorporate brands such as Sonic, KFC, Arby’s, Hardee’s, Golden Corral, Jack in the Box and others. They are typically smaller and might have struggling performance but generally have a national footprint. Loans for Tier 2 brands are generally somewhat harder to find but are still available in high quantities as long as expectations are slightly more reasonable than for Tier 1 brands.

For Tier 3 brands, there are many smaller lenders at higher prices and less favorable terms than the other Tiers. In Tier 3, it is very important to have a wide network of lenders to choose from because one lender might have a substantially different loan structure from another lender.

Finally, most banks specialize in one or maybe two of these Tiers, but few if any specialize in all of them. What does this mean? Somebody needs to have the expertise to step through the weeds of the various lenders in the various Tiers for the various brands.

At Unbridled Capital, we have dedicated professionals who handle debt placements for franchisees of all sizes across most national franchise brands. Call us anytime for a confidential conversation about how we can help you.

Rick Ormsby
Managing Director
502-252-6422
[email protected]